Megatrends

The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.

The incidence of lactose intolerance – caused by the inability to digest the milk sugar lactose – is genetically determined and varies greatly between different populations as well as also age groups. It is very rare in infancy, since babies are initially dependent on milk, but the body’s capacity to deal with lactose commonly declines as people reach adulthood. Generally speaking, Northern European populations are least affected, while lactose intolerance is most prevalent in people of East Asian descent.

The health and wellness trend has brought the issue of food intolerances and allergies to the forefront of modern consumers’ minds. A growing number are blaming lactose, at least partly, for digestive discomfort experienced after meals. In order to cut down on bloating and the embarrassment caused by the build-up of intestinal gas, more and more consumers are resorting to specialist products. Globally, lactose-free dairy and ice cream both achieved 10% value gains in 2015.

The US is the largest market for lactose-free food, accounting for 29% of global sales in 2015. Lactose-free dairy and ice cream continue to experience appreciable dynamism, considering the relative maturity of the market, enjoying value growth rates of 15% and 16%, respectively, on the previous year.

The fairlife brand of milk and milk drinks was rolled out nationally in early 2015 after Coca-Cola Co formed a partnership with the dairy cooperative Select Milk producers, which had originally launched the product in 2012. In 2015, fairlife claimed a 12.8% value share of lactose-free dairy, stealing share from its competitors – leading brand Lactaid (by Johnson & Johnson Inc) saw its value share slip from 53.1% in 2014 to 47.8% in 2015 and the third and fourth ranking brands Land O’Lakes and Dean’s shares each suffered two-percentage-point declines. fairlife LLC’s strategy of positioning its low-sugar, lactose-free, high-protein YUP! flavoured milk drinks as a guilt-free indulgence snack is clearly resonating with parents and millennials.

Stiff competition from dairy-free

Lactose-free dairy products seem to have only one nemesis: lactose-free products that are not dairy based. Our packaged food data show that other non-dairy milk alternatives (excluding soy milk) achieved the highest value growth rate of any dairy category in 2015 globally, mustering an impressive gain of 20%. Accruing a value of US$13.7 billion in 2015, the category’s sales are double those of lactose-free food in terms of size, while, at the same time, proving two-and-a-half-times as dynamic where growth is concerned.

A growing number of consumers is drawn to avoiding dairy altogether, believing themselves not only to be sensitive to milk sugar, but to dairy proteins. Some are simply seeking to reduce the animal-derived food component of their diets, be it for health, ethical or sustainability reasons.

Dairy alternatives also have the big advantage that the spread of the offering is highly diverse – all manner of nuts and cereals may serve to produce a “milk” substitute. This diversity is a fundamental part of the category’s appeal, since it caters for a wide range of preferences regarding personal taste, food intolerances and also environmental and ethical concerns. Some consumers may be allergic to one type of nut or cereal but not another, for example, while others may object to soya products (traditionally the most popular dairy alternative) on environmental grounds.

Lactose-free special baby milk formula strong in China

Unlike lactose-free dairy and ice cream, lactose-free baby food had a rather disappointing year in 2015, with global values contracting by 1%. This is largely linked to stagnant birth rates and the rising popularity of breast feeding in the highly developed markets, which make up the core customer base for any type of premium-positioned or “special” infant formula.

In some markets, however, lactose-free baby food registered an outstanding performance. The recent relaxation of China’s one-child policy has led to a baby boom, fuelling milk formula sales. Lactose-free special baby milk formula has benefited most, since growth is coming from a low sales base. Value sales shot up by 28%, making it the leading global growth market for lactose-free baby food in 2015, based on constant prices. The next most dynamic markets, where these products managed to achieve double-digit growth in that year, were Argentina, Mexico, Saudi Arabia and Hungary.

Does lactose-free dairy have a future?

Although lactose-free food’s growth performance may slow slightly over the forecast period compared to its review period performance, there is no reason to fear that the category will become obsolete any time soon.

We predict that global values of lactose-free food will continue to grow at a CAGR of 6% over the 2015-2020 forecast period, reaching US$8.8 billion in 2020. Lactose-free dairy, which is expected to enjoy a slightly higher CAGR of 7%, will account for 80% of this.

Consumers will certainly keep looking for lactose-free dairy alternatives derived from plant sources, and the choice of products multiplying on the shelves satisfies health and wellness-orientated consumers’ taste for novelty and variety, but, in the end, many will continue to appreciate a product that tastes like cow’s milk, because it is, in fact, cow’s milk, just with the lactose removed. Vegan alternatives, such as nut milks, may be tasty in their own right, but sometimes, there is just no substitute for the “real thing”. Lactose-free baby food is also only just starting to take off in key emerging markets.

In the medium-to-long term, growth will be sustained by lactose-free food gaining a foothold in markets where sales, thus far, have been rather negligible, and especially in those where dairy is a long-established part of the local diet. India is a good example. The country’s dairy market (by packaged food value sales, 2015) is comparable to Mexico and Italy in terms of size (going by 2015 packaged food value sales) and larger than that of Canada, Spain and Australia.

A study carried out in 2015 by the Sanjay Gandhi Post Graduate Institute of Medical Sciences in Lucknow, Uttar Pradesh, found that nearly three quarters of the Indian population was suffering from some degree of lactose intolerance. In late 2015, Gujarat Co-operative Milk Marketing Federation Ltd, India’s leading dairy player (by value) announced that it was the first dairy company to introduce a lactose-free milk product in India under its Amul brand.